Investment and Capital Diversity in the Small Enterprise

Competitive markets are driven by the decisions of business owners and consumers’ responses to those decisions. The efficiency outcomes of these decisions in response to known prices and technologies have been extensively examined. However, in a world in which future prices and technologies are unknown and are revealed incompletely in a time-dependent process through “market experimentation”, the role of the “firm” or the owner of the firm is supplanted by the role of the “entrepreneur”. Entrepreneurs are economic agents that must make resource allocation decisions in the context of risk, uncertainty and imperfect information, and market imperfections not faced by the business automatons of textbook markets (Herbert and Link, 1989).